Carney was understood to have won widespread support as a candidate - but to have ruled himself out of the running.

Surprise appointment: Bank of Canada Governor Mark Carney is the new supremo at the Bank of England

Chancellor George Osborne, who announced the appointment of Carney in a statement to the House of Commons, said he had recommended him to Prime Minister David Cameron who in turn recommended him to the Queen.

The Chancellor told MPs that Carney was 'the outstanding central banker of his generation with unparalleled expertise in financial regulation'.

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'He will bring a fresh perspective,' Osborne told MPs. 'He has got what it takes to help bring families and businesses through these incredibly challenging economic times.

'My responsibility was to get the best for Britain, and with Mark Carney we've got that.'

Canadian-born Carney, 47, intends to take on British citizenship to serve as governor for five years, said the Treasury. He will move to the UK with his British wife and four children, who each have joint citizenship.

Officials confirmed that Carney is the first non-British citizen appointed as governor since the Bank's inception in 1694.

Carney is also the first governor in the
Bank's history to be appointed after an open recruitment process, in
which the role was advertised and candidates interviewed by a panel.

He will take over from present governor Sir Mervyn King, who has seen both brickbats and bouquets
for taking Britain through the troubled waters of the financial crisis. Sir Mervyn has just over seven months to run before his second term ends on June
30.

Carney will be charged with navigating Britain’s way through recovery, a role which could include the tricky task of weaning the economy off the record low base rate of 0.5 per cent and unwinding the money-printing quantitative easing scheme.

The Bank of England is due to take on extra responsibilities for banking supervision as part of an overhaul of financial regulation following the economic crisis.

Favourite as candidate: Deputy Governor Paul Tucker was widely expected to be promoted to the top job at the Bank of England

The governor will have responsibility for leading the monetary policy committee that sets interest rates, regulating banks and other financial firms and heading a new committee designed to spot and ward off future crises.

Tucker had been seen as far ahead of the field of candidates until he was embroiled in controversy surrounding the Barclays Libor rigging scandal, earlier this year.

Emails between himself and former Barclays boss Bob Diamond emerged that appeared to show Mr Tucker sanctioning the bank's efforts to manipulate its borrowing costs downwards.

However, it was argued that this was a misunderstanding and he survived a grilling on the issue by MPs on the Treasury Select Committee.

Other candidates included Adair Turner, former chairman of the Financial Services Authority, Sir John Vickers, former Office of Fair Trading boss who led the Government's review into breaking up the banks, and Santander UK chairman Lord Burns.

Carney took up his post as governor of the Bank of Canada in the depths of the financial crisis in 2008.

At the time of his appointment, he was the youngest central bank governor among the G8 and G20 groups of nations and was later named as one of the world's most influential people by Time Magazine in 2010.

But it is the 13 years on Carney's CV that he spent at investment banking giant Goldman Sachs that may raise an eyebrow.

He worked at the bank's London, Tokyo, New York and Toronto offices.

Carney said: 'I am honoured to accept this important and demanding role, and to succeed Sir Mervyn King, with whom I have worked closely over these past five years and from whom I learned so much.

'This is a critical time for the British, European and global economies, a decisive period for reform of the global financial system, including its leading financial centre, the City of London, and a crucial point in the Bank of England's history as it accepts vital new responsibilities.'

Carney said it had been a privilege to serve as the eighth governor of the Bank of Canada, adding that he was proud of the bank's contribution to the resilience of the Canadian economy.

He will continue as central bank governor in Canada until the end of May next year. He expects to remain chair of the chair of the global Financial Stability Board until 2018, and has indicated that - even though his appointment as governor is for eight years - he intends to serve for five years and stand down from both jobs at the same time, said Osborne.

Carney is 'simply the best', says Osborne

Osborne described Carney as 'quite simply the best, the most experienced and most qualified person in the world to be the next governor of the Bank of England'.

He added: 'Mr Carney is unique amongst the potential candidates in combining long experience of central banking, huge international credibility in economics, deep expertise in financial regulation and a first-hand experience of private sector financial institutions.

During Mr Carney's five years as governor in Ottawa, Canada is 'acknowledged to have weathered the economic storm better than any other Western economy,' said Osborne.

'Bank bailouts have been avoided, sustained growth has returned and it says something of Mark Carney's abilities and the regard he is held in that he was chosen by his fellow central bank governors and regulators around the world to be the chair of the Financial Stability Board - the body tasked with strengthening and co-ordinating global financial regulation.

'This gives him the experience to bring better regulation to the world's largest global financial centre here in London and other financial centres across the UK.'

Osborne told MPs the appointment of Mr Carney was being simultaneously announced in Ottawa at a press conference but that the new governor did not plan on answering detailed questions about the British economy before taking up his position.

One exception to this will be a session before MPs on the Treasury select committee, on a date to be determined. The Chancellor said this would be the first time ever a new Governor was questioned by MPs before taking up his post.

Carney's pay and benefits package will be
agreed by the non-executive members of the Court of the Bank of England, Osborne said, and will be 'broadly equivalent' to the deal received
by Sir Mervyn - taking into account the incumbent's membership of the
now closed pension scheme.

Osborne said the total package was lower than that of other senior
regulators, like the recent appointment to chief executive of the
Financial Standards Authority.

Carley's pay package will be £624,000, according to Robert Peston of the BBC.

Osborne also announced the re-appointment of Charlie Bean as deputy governor of the Bank of England for monetary stability for a further year until the end of June 2014, to help oversee the extension of the Bank's powers and the transition to a new governor at Threadneedle Street.

Outgoing boss: Sir Mervyn King has received both brickbats and bouquets for taking Britain through the financial crisis

Labour's Ed Balls says Carney is 'good choice'

Carney's appointment was welcomed as a 'good choice, good judgment" by shadow chancellor Ed Balls.

Balls said: "I join you in thanking the outgoing governor Sir Mervyn King for his public service and wish him a long and happy retirement.

'I commend you on your choice of successor, Mark Carney, to be the third governor of the Bank of England since our decision to make the Bank independent in 1997.

'We look forward to working closely with him in the coming months and years.'

But the TUC's general secretary Brendan Barber said: 'The new governor has a job that the Chancellor has made close to impossible. Government policies of austerity have sent the economy back into recession and threaten a lost decade of stagnation.

'The Chancellor seems to have outsourced the job of getting the economy moving to the Bank of England but the Bank is now running out of monetary ammunition. Interest rates are about as low as they can get, and quantitative easing, while welcome as far as it goes, is not doing much to boost the real economy.

'And while the Bank has an important new role in regulating banking, the Government wants to water down the Vickers recommendations and does not have the determination to give us a finance sector that works for the rest of the economy.'

Adam Marshall, director of policy and external affairs at the British Chambers of Commerce, said: "The new governor of the Bank of England will take office at a crucial time for both the UK and global economies.

'As the Bank takes on greater supervision of Britain's financial services sector, and in particular our major lending banks, we hope that the new governor will focus relentlessly on supporting business growth across the UK - not just in the Square Mile.

Lavish praise: Chancellor George Osborne said Carney was 'quite simply the best, the most experienced and most qualified person in the world to be the next governor of the Bank of England'

'In particular, the new governor must work closely with the Treasury to find ways to boost the supply of credit to new and growing businesses. We hope that Mark Carney will also play an instrumental role in bringing a British Business Bank to life - something that Canadian small and medium-sized enterprises have benefited from for many decades.'

Veteran City commentator David Buik of
Cantor Index said: 'Though I am known to be a huge fan of Paul Tucker,
whom I genuinely believe should have been appointed on merit to succeed
Sir Mervyn King, we need to get behind our new Governor of the Bank of
England – Mark Carney.

'As
a bookmaker I was waved off the scent a few weeks ago with comments to
the effect of not interested. He was even heard to say so on BBC’s Hard
Talk.

He added: 'This
was a bold appointment of the Prime Minister and the Chancellor. Clearly
Mr Carney is very shrewd operator, who is highly regarded amongst his
peers. I am sure that the City of London will get right behind him. It
is in their interest to do so. I just hope that he is a listener as
well as being a leader.'

John Fender, professor of macro-economics at the University of Birmingham, said: 'This is a bold and imaginative appointment, which I think will take many by surprise.

'Carney is very, very highly regarded in Canada and I think he will do an excellent job. Canada is widely deemed to have handled its monetary policy well and has therefore fared better than most countries in the recent credit crunch. I think it is a good idea to bring in someone with a new perspective.'